Oct 19, 2022
BVCA Summit 2022: industry leaders assemble at first major gathering for three years
700 BVCA members and stakeholders of the private capital industry were out in force at the industry’s largest UK conference, the BVCA Summit, in central London on 6 October for the first time in-person since 2019.
BVCA members, stakeholders and industry leaders remained confident about investment opportunities and the critical role of ESG, despite the turbulent economic conditions.
The significance of the industry and its conference was recognised by Sky News inclusion of BVCA chair, Charlie Troup, on their business programme “Ian King Live”, speaking directly from the conference venue.
Key themes included how firms are navigating volatility, the development of more specialised strategies, the role of sustainable investment and new opportunities to provide returns for future UK pensioners.
The Summit could not have come at a more crucial time, with the issues closest to members’ hearts — growth, jobs, innovation — also taking centre stage in the corridors of political power, in the face of economic turmoil.
Key messages were delivered throughout the day about private capital’s role as a positive force for change in areas like ESG, with BVCA Chair Charlie Troup stating “ESG is no longer an optional extra, it’s an imperative.” He highlighted private capital’s ability to innovate and flex has been proven in previous crises and the industry remains quietly confident that through adaptability and specialism, opportunities will be realised in the months ahead.
Aside from the industry focus, which remained at the heart of the Summit, there were several sessions looking at how the industry engages with external stakeholders and demonstrates the ‘public value’ it creates. Politicians’ support of the industry came through strongly as Conservative MP Richard Fuller, Economic Secretary to the Treasury of the UK outlined details of the government’s economic plans. The emphasis on economic growth by Richard was presented as a three-part plea to BVCA members: make smart decisions; make ethical decisions; and invest in people. These were the very themes on which delegates also focused.
‘Make smart decisions’
The ability to make effective decisions is ‘baked into the industry’s model’, noted BVCA chairman, Duke Street’s Charlie Troup. Indeed, the glue that binds all parts of the asset-class is precisely this: detailed asset selection, based on detailed diligence, and active asset management, based on close control and direct action in portfolio companies.
Clearly, this does not mean everything will always go to plan, as the current economic volatility demonstrates with the prospect of rising inflation and the disruption caused by the prolonged Ukraine crisis. The industry is currently witnessing disruption of transaction activity, as bank finance is squeezed, and pricing uncertainty puts a break on deals. However, the longer-term view is one of confidence that firms would continue to invest and demonstrate their resilience through the crisis. Indeed, it was noted that ‘recession vintages’ are often the best.
The current economic volatility is also seen as an important moment for private debt and venture debt, relatively new entrants into the market, which are providing very welcome alternatives to traditional sources of finance — and it is expected they will play an important stabilising role.
‘Make ethical decisions’
While speakers commented there may be some growing ambivalence towards ESG in the US with the politicisation of ESG, the commitment to focusing, measuring and reporting on environmental, social and governance issues was unwavering among speakers — reflecting a sentiment across Europe more widely. A few leaders spoke of the need for ESG to be a part of every organisation’s operating ecosystem.
Clearly, ESG covers a wide spectrum of issues and concerns, many of which were given specific attention during key sessions. This priority for fund managers was manifest throughout the Summit, featuring as a key aspect of every discussion — whether on investment strategies, flows of capital or fund finance.
It was noted that a commitment to ESG is more than value creation for the private capital industry but equally important as a strong ‘employee value proposition’ and thus a key differentiator in attracting and retaining talent. Leaders will continue to be held to account on ESG and recognition of its role as a value creator is here to stay. The BVCA will publish a more in depth ESG article next week.
‘Invest in people’
The importance of people, from creating jobs and developing skills through to contributing to widespread public value, ran through every session of the Summit and marks another area of close alignment with the British government’s priorities.
To take just one example from the main stage… asked what it is he does, Alistair Lester replied: “Aon is in the business of people and risk.”
It is not the response one might expect from a top executive of the world’s largest insurer but helping investors to understand the risk and people aspects of the transactions they make is central to the firm’s M&A and transaction solutions. And this reflects a preoccupation with people, skills and talent among venture, growth, and buyout investors themselves.
Private capital’s focus on people is also diverse and distributed. More than two-thirds of UK private equity and venture capital is invested outside the South-East of England. In other words, far from being city-centric financiers, the industry is actively involved in ‘levelling up’ and spreading success across the nation.
The second cycle of ‘profit with purpose’ goes beyond the protection of the environment and the impact of business on the planet to the development and investment in the people who help build a better future, a reference to ‘inclusive capital’.
Private investment, public gain
Allowing more people to invest in private market assets and share in the financial return was a recurring theme. The ‘democratisation’ of the industry — making private equity for the people — was embraced as an obvious ‘good’ by all speakers.
However, there is less consensus about the precise mechanisms for dealing with the asset-class’s inherent illiquidity in relation to individual investors — a topic the BVCA will return to.
The day concluded with the longer-term view being one of confidence that firms would continue to invest and demonstrate their resilience through the crisis despite the current economic volatility. Tulip Siddiq, Labour MP, Shadow Economic Secretary to the Treasury, finished the day with this powerful recognition of the value of the private capital industry: “Your sector will be at the heart of our industrial growth strategy.”
Director General Michael Moore: “The BVCA was pleased to provide the platform for our members to meet in-person again, and we would like to thank them and our Summit sponsors for their support of our event.”
More to come…
The unmistakable positive tone of the Summit this year reflects a genuine and widespread belief that the private capital industry is invested in creating a better future, for all.
The BVCA will share further insights into some specific themes and sessions from the Summit over the coming weeks. Watch this space.
For further insights from the BVCA, visit: https://www.bvca.co.uk/Insights/Thought-Leadership/
